Indonesians are big on property investments but when it comes to property sales to foreigners, it is a different story. In the past decade, Indonesia’s GDP increased at an average of 7.31% year-on-year. This increase is primarily fuelled by the new middle class, which grows for about eight to nine million yearly.
Why Buy Property in Indonesia?
Properties in Indonesia offer an interesting investment opportunity that requires minimal capital requirement compared with other developed countries. In Indonesia, an individual can buy a property for roughly Rp1 billion or approximately US$67,000.
Rental yield and capital gains for each property depending on the region and the property itself. Strategically located properties with major infrastructures around would have higher yields.
Where to Buy Property in Indonesia?
For foreigners, the top three areas to purchase a property include:
- South Jakarta
These areas are where foreigners have established their residences. They are ideal because they have already an established expat community there. However, this does not mean that these areas would be the best when it comes to earning huge profits.
For large capital gains, foreigners should invest in Indonesia’s “sunrise” cities. These up and coming cities are currently under development. These cities have major infrastructure projects and new toll road but still have affordable property prices that will increase over time.
How to Buy Property in Indonesia as a Foreigner
Have a valid stay permit.
Make sure that you have any kind of stay permit. This can be a service stay permit (izin tinggal dinas), on-visitation stay permit (izin tinggal kunjungan), diplomatic stay permit (izin tinggal diplomatik), limited stay permit (izin tinggal terbatas), or permanent stay permit (izin tinggal tetap).
Know the different certificate types.
In Indonesia, foreigners are allowed to own a property through hak pakai or right-to-use. The property can be built above a land where the foreigner has a right-to-own or hak milik. It could also be on a right to use above land with a right to build or hak guna bangunan.
Understand the title duration.
Depending on the title, foreigners only have a set duration on their land ownership. For the right-to-use title, the duration is 30 years. The possible extension is 20 years and another 30 years, thereafter.
For a right-to-use above right-to-own, the duration is 30 years and can be extended by 20 years by agreement with the landowner. When it expires, the foreigner and the landowner can agree to extend it for another 30 years.
For a right-to-use above a right-to-build, the duration depends on the remaining time of the right-to-build title. Like other titles, it can be extended by 20 years and another 30 years.
Look for a property matching the minimum price requirement.
Indonesia property laws have set minimum prices for foreigners to buy a property, often higher than the locals. This is because the government wants to prevent prices to become too expensive for its citizens.
However, note that foreigners can own only one plot of land per person or family, with a maximum area of 2,000 square metres. This limitation on land size can be bigger if it can fulfill the condition of having positive effects on the Indonesian economy.
Compared with Indonesia, buying a property in Thailand is more favourable for foreigners. In Thailand, foreigners can own condo units and villas on a freehold basis. Moreover, foreigners do not have to be a resident to have the right to own property. It is also much easier to secure a long-term visa.